Question

For which one of the reasons below do actuaries review claim files?

1) To assess the validity of the claim
2) To determine the amount of the claim
3) To identify potential fraud
4) To calculate the insurance premium

Answer 1

Actuaries review claim files primarily to identify potential fraud, which is essential for the insurance system's integrity. They also contribute to determining actuarially fair insurance premiums, ensuring they reflect the actual risk and covering claims, operational costs, and company profits.

Step-by-step explanation:

Actuaries review claim files for several reasons, and among the options provided, the one that aligns most closely with their role is to identify potential fraud. This is integral to ensuring the integrity and longevity of the insurance system. While assessing the validity of the claim and determining the amount of the claim are also part of their job, these tasks primarily fall to claims adjusters.

An actuarially fair insurance policy is one in which the premiums charged reflect the true level of risk being insured. Moreover, actuarial analysis plays a crucial role in the calculation of insurance premiums, which are periodic payments made by the insured party to the insurance company in exchange for coverage. In this process, actuaries must consider the fundamental law of insurance, ensuring that the total of all premiums collected consistently covers the claims paid, the company's operating expenses, and profits.